Liaison Counsel Clas v. Ford Motor Company ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 03-1379 & 03-1564
In the Matter of:
BRIDGESTONE/FIRESTONE, INC., TIRES PRODUCTS
LIABILITY LITIGATION
Appeals of:
FORD MOTOR COMPANY, BRIDGESTONE/FIRESTONE
NORTH AMERICAN TIRE, L.L.C., and BRIDGESTONE
CORPORATION
____________
Appeals from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. IP 00-9373-C-B/S (MDL No. 1373)—Sarah Evans Barker, Judge.
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ARGUED MAY 28, 2003—DECIDED JUNE 20, 2003
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Before EASTERBROOK, MANION, and KANNE, Circuit
Judges.
EASTERBROOK, Circuit Judge. This appeal is successive
to last year’s decision that the district court abused its
discretion by certifying nationwide classes covering multi-
ple models of Ford vehicles and Firestone tires sold be-
tween 1990 and 2001. See In re Bridgestone/Firestone,
Inc., Tires Products Liability Litigation, 288 F.3d 1012 (7th
Cir. 2002), cert. denied, 123 S. Ct. 870 (2003). Classes
comprising owners of more than 60 million tires and 3
million vehicles, including many different models, are
2 Nos. 03-1379 & 03-1564
unsuitable for several reasons, we concluded—not the
least of which is that different rules of law govern differ-
ent members of the class. The district court thought
that Indiana’s choice-of-law doctrines select a single
state’s law to govern each kind of product; we disagreed
with this conclusion and held that Indiana would apply
the law of the state where the injury occurred. A need
to apply multiple states’ laws was among the considera-
tions that rendered certification of nationwide classes
improvident, we held.
After the Supreme Court denied class counsel’s petition
for certiorari, lawyers representing the plaintiffs decided
to try again, in other courts. Class suits have been filed
in many jurisdictions; in at least five suits, plaintiffs
seek certification of the same nationwide classes that our
opinion nixes. One state judge certified a nationwide
class on the day complaint was filed, without awaiting
a response from the defendants and without giving rea-
sons. Ford and Firestone asked the district judge to enforce
our decision by enjoining other class actions—not just
other efforts to launch nationwide classes, but any class
action, even one limited to a single product in a single
state. The district court denied this motion, and the de-
fendants immediately appealed on the authority of 28
U.S.C. §1292(a)(1).
Throughout this litigation, both sides have gravitated
to the extremes. Plaintiffs’ lawyers sought nationwide
classes that depended on an implausible uniformity of
both law and fact, grinding down all differences among
the buyers and the products to make a mega-class man-
ageable. Defendants replied by extolling the virtues of
federalism and the wisdom of allowing each state a free
hand to resolve these disputes. Once we disappointed
the plaintiffs’ ambitions, however, the litigants began to
sing each other’s songs. Today the plaintiffs celebrate
federalism and trumpet the acumen of state judges in
Nos. 03-1379 & 03-1564 3
handling complex litigation, while defendants seek a
uniform outcome, which would forbid any state court to
entertain any class action of any kind concerning these
products. Plaintiffs were off the mark the first time, and
defendants are off the mark now—though neither side
has been wholly right, then or now.
The Anti-Injunction Act, 28 U.S.C. §2283, forbids any
federal injunction or stay of state litigation “except as
expressly authorized by Act of Congress, or where neces-
sary in aid of its jurisdiction, or to protect or effectuate
its judgments.” Defendants contend that an anti-class-
action injunction is necessary to carry out our decision of
last year. Yet the only classes that had been certified
had national scope, and the only judgment that could
be protected or effectuated is one concerning such classes.
(The first appeal did produce a “judgment”; courts of
appeals, like district courts, enter judgments, see Fed. R.
App. P. 36, and §2283 refers to all “judgments” rather
than just “final judgments.”) The district court had not
certified, and our opinion thus did not address, any state-
wide class. Although we suggested that even a single-
state class covering multiple models of tire or SUV would
be unmanageable and inferior to supervision by the
National Highway Transportation Safety Administration,
see 288 F.3d at 1018-21, this assessment did not be-
come part of our judgment. State courts are free to de-
cide for themselves how much effort to invest in creating
subclasses (so that each model of tire or SUV receives
appropriate consideration); advice designed to ward off
what a federal court deems an unproductive investment
of judicial time does not create a “judgment” that forbids
any state tribunal to make the effort. Indeed, our opinion
contemplated that states would certify narrower classes;
we gave, as an example, “1995 Explorers in Arizona
equipped with a particular tire specification”, id. at 1020.
So the district court properly denied Ford’s request for an
4 Nos. 03-1379 & 03-1564
injunction that would preclude any class suit in any
state court. Each state may apply its own choice-of-law
rules (and its own substantive law, if otherwise appro-
priate) in a way that a federal court, trying to apply
nationally homogenized law, could not.
What we did hold is that a class covering owners in
every state may not be certified over the defendants’
opposition. (We did not consider the possibility of settle-
ment classes, which pose different issues. See Amchem
Products, Inc. v. Windsor, 521 U.S. 591 (1997); In re
Mexico Money Transfer Litigation, 267 F.3d 743, 746-47
(7th Cir. 2001).) This holding is the basis of our judg-
ment reversing the district court’s order certifying nation-
wide classes. The Anti-Injunction Act permits a federal
court to protect and effectuate that judgment by equitable
relief. Normally the second court determines the pre-
clusive effect of a judgment, see Maintenance of Way
Employees v. Burlington Northern R.R., 24 F.3d 937, 940
(7th Cir. 1994), so the appropriate course is to deny a
request for an anti-suit injunction even when §2283 does
not itself close the door. But when federal litigation is
followed by many duplicative state suits, it is sensible to
handle the preclusive issue once and for all in the orig-
inal case, rather than put the parties and state judges
through an unproductive exercise. That these suits are
multiplying suggests that some lawyers have adopted a
strategy of filing in as many courts as necessary until a
nationwide class comes into being and persists. (We as-
sume that the ex parte certification already mentioned
ultimately will be vacated as an obvious violation of
procedural requirements.)
Relitigation can turn even an unlikely outcome into
reality. Suppose that every state in the nation would as
a matter of first principles deem inappropriate a nation-
wide class covering these claims and products. What this
might mean in practice is something like “9 of 10 judges
Nos. 03-1379 & 03-1564 5
in every state would rule against certifying a nationwide
class” (in the federal courts, it has meant that 3 of 4
judges have ruled against the proposed nationwide
classes). Although the 10% that see things otherwise are
a distinct minority, one is bound to turn up if plaintiffs
file enough suits—and, if one natonwide class is certified,
then all the no-certification decisions fade into insignifi-
cance. A single positive trumps all the negatives. Even if
just one judge in ten believes that a nationwide class is
lawful, then if the plaintiffs file in ten different states
the probability that at least one will certify a nationwide
class is 65% (0.910 = 0.349). Filing in 20 states produces
an 88% probability of national class certification (0.920 =
0.122). This happens whenever plaintiffs can roll the dice
as many times as they please—when nationwide class
certification sticks (because it subsumes all other suits)
while a no-certification decision has no enduring effect.
Section 2283 permits a federal court to issue an injunction
that will stop such a process in its tracks and hold both
sides to a fully litigated outcome, rather than perpetuat-
ing an asymmetric system in which class counsel can
win but never lose.
Nonetheless, class counsel tells us, the legal system
entitles them to the benefit of this heads-I-win, tails-you-
lose situation. This is so, class counsel contend, for three
principal reasons: first, this federal action has not pro-
duced a final judgment; second, states may employ their
own rules of preclusion; third, the federal court lacks
personal jurisdiction over state-court plaintiffs who did
not participate in the federal proceeding. None of these
arguments is sound.
Although claim preclusion (res judicata) depends on a
final judgment, issue preclusion (collateral estoppel) does
not.
The rules of res judicata are applicable only when
a final judgment is rendered. However, for purposes
6 Nos. 03-1379 & 03-1564
of issue preclusion (as distinguished from merger
and bar), “final judgment” includes any prior
adjudication of an issue in another action that is
determined to be sufficiently firm to be accorded
conclusive effect.
Restatement (Second) of Judgments §13 (1980). Our deci-
sion that no nationwide class is tenable is “sufficiently
firm” for this purpose. It was the result of focused atten-
tion by counsel in both the district court and this court;
both courts addressed the issue exhaustively in pub-
lished opinions and brought the debate to a conclusion;
certiorari was sought and denied. Class counsel filed a
master complaint in the court assigned to resolve pretrial
matters in this multidistrict litigation, precisely so that
a single disposition could be reached that would cover
all suits, no matter where they had originally been filed.
Because the decision stemmed from a complaint filed in
the Southern District of Indiana, Lexecon Inc. v. Milberg
Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998), has
no bearing; the district court had original jurisdiction
and was not acting as a transferee court under 28 U.S.C.
§1407 with respect to this complaint. Having sought
and obtained a decision on the master complaint, class
counsel are in no position to treat the resolution as irrele-
vant and start anew. Cf. In re Rhone-Poulenc Rorer, Inc., 51
F.3d 1293, 1299-1300 (7th Cir. 1995).
The preclusive effect of a judgment rendered by a fed-
eral court depends on national rather than state law.
Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497(2001). Although Semtek adds that federal law usually
incorporates state law when the federal judgment stems
from litigation under the diversity jurisdiction, this does
not assist class counsel: the master complaint included
two claims under federal law. What is more, the norm
stated in Semtek has a proviso: state rules that under-
mine the finality of federal judgments are not incorpo-
Nos. 03-1379 & 03-1564 7
rated. To the extent plaintiffs want to urge state courts
to disregard our judgment on the ground that it was not
final, but “merely” resolved one contested issue, that
course is cut off by Semtek’s proviso; it is incompatible
with federal law for states to ignore federal interlocutory
judgments as class counsel propose. Nothing in Baker v.
General Motors Corp., 522 U.S. 222 (1998), on which class
counsel heavily rely, undermines this conclusion. Baker
holds that one state court’s decision about a procedural
issue need not bind another state court. It does not dis-
cuss the effect of federal judgments under the federal law
of preclusion. And the sort of procedural issue at stake
in Baker—who may give evidence, and under what
restrictions—is very different from a ruling on class
certification, which determines the identity of the parties
and stakes of the case. Determining the permissible
scope of litigation is as much substantive as it is proce-
dural. Our judgment was based not simply on a belief
that managing national classes would consume too much
of a federal court’s limited supply of time; it also was
based on a conclusion that certification of national classes
would compromise the legitimate interests of defendants.
Baker thus has no bearing on the preclusive effect (in
state court) of rulings about class status made by a federal
court.
Class counsel’s jurisdictional argument starts from the
premise that only named class representatives, and not
members of putative classes, are treated as parties to
litigation. Unnamed class members cannot be brought
in involuntarily, class counsel insist, because federal
courts lack the authority to issue process nationwide. As
a result, class members other than the named representa-
tives cannot be bound by an adverse decision and are free
to file their own class actions elsewhere. The proposi-
tion that the federal court lacks the power to issue nation-
wide process must be qualified by the proviso “unless a
8 Nos. 03-1379 & 03-1564
federal statute authorizes this step”; and one of the
claims in the master complaint rested on RICO, which does
authorize nationwide service of process. See 18 U.S.C.
§1965(b); Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668,
671 (7th Cir. 1987). What is more, unnamed class mem-
bers have the status of parties for many purposes and are
bound by the decision whether or not the court other-
wise would have had personal jurisdiction over them.
See Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985).
Just as they receive the fruits of victory, so an adverse
decision is conclusive against them. See Williams v. General
Electric Capital Auto Lease, Inc., 159 F.3d 266 (7th Cir.
1998) (district court may enjoin state-court suit brought
by absent class member). Devlin v. Scardelletti, 536 U.S. 1(2002), holds that unnamed class members are entitled
to appeal or seek certiorari without intervening; any
would-be member of the class could have sought certiorari
from our adverse decision. The premise of allowing
class members to seek review by a higher court is that
otherwise they would be bound by defeat. District courts
with authority over the original class claim may issue
writs under 28 U.S.C. §1651 in aid of that jurisdiction.
See Williams and Winkler v. Eli Lilly & Co., 101 F.3d
1196 (7th Cir. 1996). They do not need a separate grant
of subject-matter jurisdiction. See also Syngenta Crop
Protection, Inc. v. Henson, 537 U.S. 28 (2002) (although
§1651 does not create federal jurisdiction, district courts
may issue writs ancillary to cases over which they other-
wise have original jurisdiction).
A decision with respect to the class is conclusive only
if the absent members were adequately represented by
the named litigants and class counsel. That requirement
has been met. The district court found that both the
named plaintiffs and their lawyers furnished adequate
representation to the other members of the putative
classes. 205 F.R.D. 503, 518-19 (S.D. Ind. 2001). That
Nos. 03-1379 & 03-1564 9
decision was not challenged on the first appeal and is not
contested now. Holding the absent class members to the
outcome is no more an exercise in virtual representation
than it is to hold them to a decision on the merits. “Virtual
representation,” a doctrine that we disapproved in Tice
v. American Airlines, Inc., 162 F.3d 966 (7th Cir. 1998),
would permit the outcome of one non-class suit to con-
trol another if the plaintiffs are similarly situated; Tice
holds, to the contrary, that, outside the domain of class
actions, precedent rather than preclusion is the way one
case influences another. Our suit, by contrast, was com-
menced as a class action, and one vital issue was litigated
and resolved on a class-wide basis: whether a national
class is tenable. Absent class members are bound pro-
vided that the named representatives and their lawyers
furnished adequate representation, which they did.
True, the district court did not offer unnamed class
members an opportunity to opt out of the certification
decision. Plaintiffs now contend that this is fatal to any
invocation of preclusion. Yet no statute or rule requires
notice, and an opportunity to opt out, before the certifica-
tion decision is made; it is a post-certification step. See
Fed. R. Civ. P. 23(c)(2). No one is entitled to opt out of
the certification, a decision necessarily made on a class-
wide, all-or-none basis; one opts out of a certified class.
And a person who opts out receives the right to go it
alone, not to launch a competing class action. Preserving
the right to litigate individually, as one’s own champion,
is the point of opting out. The opt-out avoids any risk
of the class’s loss on the merits and also forswears any
opportunity to take advantage of the class’s victory.
See Premier Electrical Construction Co. v. National
Electrical Contractors Ass’n, Inc., 814 F.2d 358 (7th Cir.
1987). Every person included in the district court’s
class definition still has the right to proceed on his own.
What such a person now lacks is the right to represent a
10 Nos. 03-1379 & 03-1564
national class of others similarly situated; that’s the up-
shot of a fully contested litigation in which every poten-
tial class member was adequately represented on this issue.
Our prior judgment is binding in personam with respect
to the unnamed class members. The district judge must
enforce that judgment by issuing an injunction that pre-
vents all members of the putative national classes, and
their lawyers, from again attempting to have nationwide
classes certified over defendants’ opposition with respect
to the same claims. The case is remanded for the entry
of such an injunction. To the extent defendants seek
broader relief, however, the district court’s decision is
affirmed.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-20-03